Branches Neighborhood Corp. v. CalAtlantic Group, Inc. ( 2018 )

Filed 8/10/18; pub. order 8/24/18 (see end of opn.)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
BRANCHES NEIGHBORHOOD
CORPORATION,
G055201
Plaintiff and Appellant,
(Super. Ct. No. 30-2017-00913469)
v.
OPINION
CALATLANTIC GROUP, INC.,
Defendant and Respondent.
Appeal from a judgment of the Superior Court of Orange County, Glenda
Sanders, Judge. Affirmed.
Fenton Grant Mayfield Kaneda & Litt, Gregory S. Lew and Daniel H.
Glifford for Plaintiff and Appellant.
Plante Lebovic, Brian C. Plante and Gregory M. Golino for Defendant and
Respondent.
* * *
Plaintiff Branches Neighborhood Corporation (Branches or the
association), a community association incorporated pursuant to the Davis-Stirling
1
Common Interest Development Act (Civ. Code, § 4000, et seq.) (the Act), filed an
arbitration claim against the association’s developer, defendant CalAtlantic Group, Inc.,
formerly known as Standard Pacific Corp. (Standard), for construction defects. The
arbitrator granted summary judgment in Standard’s favor, concluding the association did
not receive the consent of its members to file the claim until after the claim was filed, in
violation of its declaration of Covenants, Conditions and Restrictions (CC&Rs). The trial
court subsequently denied the association’s motion to vacate the award, concluding the
court had no power to review the arbitrator’s decision.
Branches argues on appeal that the trial court incorrectly denied its motion
to vacate because the arbitrator exceeded its powers by abridging an unwaivable statutory
right or public policy. We find no such right or policy, and accordingly, the plain
language of the CC&Rs controls. We therefore affirm the judgment.
I
FACTS
Branches is located in Ladera Ranch and consists of residential
condominium units. Its operation is subject to both the provisions of the Act and its own
CC&Rs. Standard was the builder, as defined by the Act. (§ 911.)
In October 2014, Branches gave notice to Standard under section 910,
stating that it intended to make a claim for construction and design defects. Branches
requested that Standard provide relevant plans and specifications within 30 days, and
provided a preliminary list of defects. The listed defects were wide-ranging, including
problems impacting both individual units and the common area.
1
Subsequent statutory references are to the Civil Code unless otherwise indicated.
2
In March 2015, the parties entered into a stipulation to engage in the
prelitigation procedures set forth in the Act. (§ 6000.) Jim Roberts, an attorney, was
designated as mediator and dispute resolution facilitator. The parties agreed to a list of
steps, including joint site inspections and testing, production of documents by each side,
preparation of expert reports, creation of a more detailed defect list, and ultimately,
mediation and a settlement meeting. The parties were ultimately unsuccessful, and the
prelitigation procedures ended in November 2015.
On January 12, 2016, Branches filed a demand for arbitration with Judicial
Arbitration and Mediation Services. The claim alleged various construction defects and
sought in excess of $5 million in damages, alleging strict liability, breach of warranties,
negligence, statutory liability, and various other theories. The Honorable James Smith, a
retired judge, was appointed to serve as arbitrator.
At an initial conference, the arbitrator ordered Branches to file a short
statement of the factual basis for each claim being asserted, and directed the parties to
meet and confer about a case management order. On May 31, Branches served a revised
demand for arbitration that included the short statement the arbitrator had ordered.
Standard subsequently served an answer. Among many other defenses, Standard asserted
Branches had failed to comply with the CC&Rs: “Respondent is informed and believes
based thereon alleges that Claimant failed to comply with numerous provisions in the
CC&Rs, including but not limited to, section 12.4.2 (obtaining the vote or written consent
of 51 % [of] Claimant’s members prior to initiating a construction defect claim) . . . .”
In late June, the arbitrator filed a case management order, governing
discovery and prehearing motions, and set a tentative timeline for the arbitration for
“sometime after May 8, 2017.”
Standard propounded interrogatories to Branches, which provided
responses on August 22. Question No. 1 asked if Branches had obtained the written vote
or written consent of no less than 51 percent of the members before serving Standard
3
with notice in October 2014. Branches provided rather boilerplate objections, but
ultimately answered: “No.” It provided the same answer to the next question, which
asked whether it had received a vote or consent of at least 51 percent of the members
prior to commencing arbitration. Branches again answered “[n]o,” after stating its
objections to the question.
On October 20, Branches held a membership meeting. According to the
declaration of the property manager, 93 of 173 members appeared in person or by proxy,
constituting a quorum under the association’s bylaws. The membership was asked to
either “1) Approve and ratify the prosecution of the construction defect claim against . . .
[Standard]; or 2) Disapprove the prosecution of the construction defect claim against . . .
[Standard].” Of the 93 members present in person or by proxy, 92 voted to ratify.
On November 1, Standard filed a motion for summary judgment based on
the association’s “failure to obtain the requisite vote or written consent of the Owners
who represent not less than fifty-one percent (51%) of the [association’s] voting power,
which is a condition precedent to bringing this action.” Standard argued that section
12.4.2 of the CC&Rs requires a vote prior to filing the claim. That section states:
“Required Vote to Make Claim. Prior to filing a claim pursuant to the ADR Provisions,
the Neighborhood Corporation must obtain the vote or written consent of Owners other
than Neighborhood Builder who represent not less than fifty-one percent (51%) of the
Neighborhood Corporation’s voting power (excluding the voting power of Neighborhood
2
Builder.” Branches filed an opposition, to which Standard replied.
2
The referenced “ADR Provisions” state that any “dispute” is governed by the arbitration
provisions in the home or common property warranties. “Dispute” is defined as “any and
all actions or claims between any Neighborhood Builder party on the one hand and any
Owner and/or the Neighborhood Corporation on the other hand arising out of or in any
way relating to the Neighborhood, any real property or Improvements in the
Neighborhood . . . the Common Property Warranty, and/or any other agreements or
duties or liabilities as between any Neighborhood Builder party and any Owner and/or
the Neighborhood Corporation relating to the sale or transfer of the Condominiums or the
4
The arbitrator heard argument on the matter, and on January 12, 2017
issued a case management order granting Standard’s motion. It was undisputed, the order
stated, that the requisite consent of the membership had not been obtained prior to
starting arbitration proceedings, as was the relevant language in the CC&Rs. The
arbitrator concluded that the October ratification vote was insufficient. “The effect of the
ratification Vote is nothing more than an indication by the voting owners that on October
12, 2016 they approved the action of the Association in filing the Demand for
Arbitration. This after the fact expression of consent cannot be transmuted into the prior
consent required by the CC&Rs. This is particularly so when such a result would
adversely impact the rights of a party to the agreement by which the CC&Rs were
created. The Developer is such a party.” The arbitrator also rejected Branches’
contentions that the CC&R provision was unenforceable, that enforcing it in the present
context would be unconscionable, or that Standard had no standing to enforce it. The
arbitrator subsequently denied a motion for reconsideration or a new trial.
In April 2017, Standard filed a motion to confirm the arbitration award.
Branches filed a combined response to Standard’s motion and a petition to vacate,
arguing the arbitrator had exceeded his powers by depriving Branches of its statutory
rights. The parties extensively briefed the issue and the trial court heard the parties’
arguments.
The trial court granted the motion to confirm and denied the motion to
vacate, finding the arbitrator had not exceeded his powers.
Common Property, or regarding the use or condition of the Condominiums and/or the
Common Property, or the design or construction of or any condition on or affecting the
Neighborhood and/or any Condominium and/or the Common Property in the
Neighborhood, including without limitation construction defects . . . .”
5
II
DISCUSSION
Statutory Scheme and Standard of Review
“The California Arbitration Act (CAA; [Code Civ. Proc.,] § 1280 et seq.)
‘represents a comprehensive statutory scheme regulating private arbitration in this state.’”
(Cooper v. Lavely & Singer Professional Corp. (2014) 230 Cal. App. 4th 1, 10; see
Moncharsh v. Heily & Blase (1992) 3 Cal. 4th 1, 9 (Moncharsh).) Under the CAA, “[t]he
scope of judicial review of arbitration awards is extremely narrow because of the strong
public policy in favor of arbitration and according finality to arbitration awards.
[Citations.] An arbitrator’s decision generally is not reviewable for errors of fact or law.”
(Ahdout v. Hekmatjah (2013) 213 Cal. App. 4th 21, 33; see Moncharsh, supra, 3 Cal.4th at
p. 11.) This is true even when the “error appears on the face of the award and causes
substantial injustice to the parties.” (Id. at p. 6.)
Judicial review of an arbitration award is ordinarily limited to the statutory
grounds for vacating an award under Code of Civil Procedure section 1286.2 or
correcting an award under Code of Civil Procedure section 1286.6. (Moncharsh, supra,
3 Cal.4th at pp. 12-13; Sunline Transit Agency v. Amalgamated Transit Union, Local
1277 (2010) 189 Cal. App. 4th 292, 302-303.)
There are, however, certain “narrow exceptions” to the general rule of
arbitral finality. (Moncharsh, supra, 3 Cal.4th at p. 11.) Branches advances one of those
exceptions here, specifically, that the arbitrator exceeded his powers. We discuss this in
detail below.
As for the relevant standard of review, “[t]o the extent the trial court made
findings of fact in confirming the award, we affirm the findings if they are supported by
substantial evidence. [Citation.] To the extent the trial court resolved questions of law
on undisputed facts, we review the trial court’s rulings de novo. [Citation.] [¶] We
apply a highly deferential standard of review to the award itself, insofar as our inquiry
6
encompasses the arbitrator’s resolution of questions of law or fact. Because the finality
of arbitration awards is rooted in the parties’ agreement to bypass the judicial system,
ordinarily ‘“[t]he merits of the controversy between the parties are not subject to judicial
review.” [Citations.]’ [Citation.]” (Cooper v. Lavely & Singer Professional Corp.,
supra, 230 Cal.App.4th at pp. 11-12.) Because the issue of whether the arbitrator
exceeded his powers is a legal question based on undisputed facts, our review on that
point is de novo. (Richey v. AutoNation, Inc. (2015) 60 Cal. 4th 909, 918, fn.1 (Richey).)
The Pertinent Exception to the Rule of Finality
Code of Civil Procedure section 1286.2, subdivision (a)(4), states that the
trial court shall vacate an arbitration award if “[t]he arbitrators exceeded their powers and
the award cannot be corrected without affecting the merits of the decision upon the
controversy submitted.”
“Arbitrators may exceed their powers by issuing an award that violates a
party’s unwaivable statutory rights or that contravenes an explicit legislative expression
3
of public policy.” (Richey, supra, 60 Cal.4th at p. 916.) This departure from the general
rule applies only in “limited and exceptional circumstances.” (Moncharsh, supra,
3 Cal.4th at p. 32.) “‘Arbitrators do not ordinarily exceed their contractually created
powers simply by reaching an erroneous conclusion on a contested issue of law or fact,
and arbitral awards may not ordinarily be vacated because of such error . . . .’” (Cable
Connection, Inc. v. DIRECTTV, Inc. (2008) 44 Cal. 4th 1334, 1360.) “Without an explicit
legislative expression of public policy, however, courts should be reluctant to invalidate
an arbitrator’s award on this ground. The reason is clear: the Legislature has already
expressed its strong support for private arbitration and the finality of arbitral awards . . . .
Absent a clear expression of illegality or public policy undermining this strong
3
In the interests of brevity, we refer to this as the “unwaivable right exception,” although
it encompasses both unwaivable statutory rights and public policy.
7
presumption in favor of private arbitration, an arbitral award should ordinarily stand
immune from judicial scrutiny.” (Moncharsh, supra, 3 Cal.4th at p. 32.)
“[E]valuating a challenge to an arbitration award is a two-step process—
first the court must determine whether the award is reviewable, and only if review is
appropriate does the court consider whether the award should be upheld.” (SingerLewak
LLP v. Gantman (2015) 241 Cal. App. 4th 610, 621-622 (SingerLewak).) “The threshold
question here, then, is whether according the arbitration award finality would be
inconsistent with protecting [respondent’s] statutory rights.” (Id. at p. 622.)
The right that Branches claims applies here is the “right” to ratify the
association’s actions; it claims this is not conferred by a single statute, but by several
statutes. Because the arbitrator misconstrued these statutes and denied the association
this “right,” the association claims, the arbitrator exceeded the scope of his powers.
To shed some light on this subject, we examine cases where an arbitrator
was found to have exceeded his or her powers on this basis. Pearson Dental Supplies,
Inc. v. Superior Court (2010) 48 Cal. 4th 665 (Pearson Dental), involved an arbitration
award rejecting an employee’s statutory employment claims as time-barred. The court
held the arbitrator clearly erred in concluding the employee’s claims were time-barred,
and that error was reviewable because the arbitration involved unwaivable statutory
claims and the legal error deprived the employee of a hearing on the merits. (Id. at
p. 675.) “We held that when ‘an employee subject to a mandatory employment
arbitration agreement is unable to obtain a hearing on the merits of his FEHA claims, or
claims based on other unwaivable statutory rights, because of an arbitration award based
on legal error, the trial court does not err in vacating the award.’ [Citation.]” (Richey,
supra, 60 Cal.4th at p. 918.)
In Richey, the California Supreme Court went on to recognize the limited
application of the unwaivable right exception: “The arbitrator [in Pearson Dental]
‘misconstrued the procedural framework under which the parties agreed the arbitration
8
was to be conducted, rather than misinterpreting the law governing the claim itself’
[citation], a distinction that explained the narrow application of our holding and one that
also guides the scope of our review here. Pearson Dental emphasized that its legal error
standard did not mean that all legal errors are reviewable. [Citation.] The arbitrator had
committed clear legal error by (1) ignoring a statutory mandate, and (2) failing to explain
in writing why the plaintiff would not benefit from the statutory tolling period.” (Richey,
4
supra, 60 Cal.4th at p. 918.)
In SingerLewak, supra, 241 Cal. App. 4th 610, the court rejected the claim
that the unwaivable right exception applied. The case involved the enforcement of a
noncompete clause in a partnership agreement. (Id. at p. 614.) The arbitrator concluded
the defendant was a partner, thus defeating the defendant’s argument that Business and
Professions Code section 16602, which prohibits noncompete clauses for most
employees, did not apply to him. In the trial court, the defendant opposed a motion to
confirm the award in the plaintiff’s favor, arguing the award was illegal and violated
public policy. (Id. at p. 615.)
The Court of Appeal disagreed, finding that although the restraint on
noncompete clauses constitutes an unwaivable statutory right, the statutory scheme in the
Business and Professions Code itself created an exception to the policy. (SingerLewak,
supra, 241 Cal.App.4th at p. 624.) “[T] he arbitration award, even if legally erroneous,
4
Despite the California Supreme Court’s useful discussion of the exception, the facts of
Richey itself are not helpful to our analysis, as the case ultimately turned on the lack of
prejudicial error. In Richey, the court was reviewing an appeal under the California
Family Rights Act (CFRA). (Gov. Code, §§ 12945.1, 12945.2.) The arbitrator had
rejected an employee’s claim for reinstatement under the CFRA, relying on a federal
defense previously untested in California. The trial court confirmed the award, but the
Court of Appeal reversed, concluding the arbitrator had violated the employee’s statutory
right to reinstatement when he applied the federal defense to the employee’s claim.
(Richey, supra, 60 Cal.4th at pp. 912, 915.) The California Supreme Court reinstated the
award on the alternate ground that the employee had not demonstrated that applying the
federal defense was prejudicial. (Id. at p. 920.)
9
did not contravene a public policy indicating that certain issues not be subject to
resolution by the arbitrator. [Citation.]” (Ibid.) Further, “[i]n contrast to Pearson, any
arbitrator error did not ‘[misconstrue] the procedural framework under which the parties
agreed the arbitration was to be conducted, rather than misinterpreting the law governing
the claim itself.’ [Citation.] Indeed, [the defendant’s] argument is precisely that the
arbitrator misinterpreted the law governing the claim itself.” (Ibid.)
Recent case law, therefore, stands “for the proposition that where an
arbitrator’s decision has the effect of violating a party’s statutory rights or well-defined
public policies—particularly those rights and policies governing the conduct of the
arbitration itself—that decision is subject to being vacated or corrected.” (Sargon
Enterprises, Inc. v. Browne George Ross LLP (2017) 15 Cal.App.5th 749, 765.) The
question, then, is whether that principle applies to the instant case.
“Unwaivable Statutory Right”
Branches first asserts, without supporting authority, that section 12.4.2 of
the CC&Rs “conflicts with governing statutes, and is, for that reason, unenforceable.”
The CC&Rs language is clear: “Required Vote to Make Claim. Prior to filing a claim
pursuant to the ADR Provisions, the Neighborhood Corporation must obtain the vote or
written consent of Owners other than Neighborhood Builder who represent not less than
fifty-one percent (51%) of the Neighborhood Corporation’s voting power (excluding the
voting power of Neighborhood Builder.” Unless Branches can provide legal authority
why that clause should not be given effect, the plain language of the CC&Rs controls.
(Franklin v. Marie Antoinette Condominium Owners Assn. (1993) 19 Cal. App. 4th 824,
829.)
Branches turns to a number of statutes which it claims give it the “statutory
right” to use ratification as an alternate method to obtaining the prior consent the CC&Rs
command. First, Branches turns to section 4065, which states: “If a provision of this act
10
requires that an action be approved by a majority of all members, the action shall be
approved or ratified by an affirmative vote of a majority of the votes entitled to be cast.”
5
(Italics added.) The Law Revision Commission Comments on section 4065, however,
state: “Section 4065 is new. It is added for drafting convenience. This section only
governs an election conducted pursuant to a provision of this act (i.e., the Davis-Stirling
Common Interest Development Act). An election that is not required by this act would
6
be governed by the association’s governing documents.”
Branches similarly relies on section 4070, which states: “If a provision of
this act requires that an action be approved by a majority of a quorum of the members,
the action shall be approved or ratified by an affirmative vote of a majority of the votes
represented and voting in a duly held election in which a quorum is represented, which
affirmative votes also constitute a majority of the required quorum.” (Italics added.)
Section 4070 includes a Law Revision Commission Comment identical to the substance
of the one quoted above with regard to section 4065.
Next, Branches cites section 6150, which requires an association to hold a
meeting “[n]ot later than 30 days prior to the filing of any civil action by the association
against the declarant or other developer of a common interest development for alleged
damage to the common areas, alleged damage to the separate interests that the association
is obligated to maintain or repair, or alleged damage to the separate interests that arises
out of, or is integrally related to, damage to the common areas or separate interests that
5
The official comments of the California Law Revision Commission “are declarative of
the intent not only of the draftsman of the code but also of the legislators who
subsequently enacted it.” (People v. Williams (1976) 16 Cal. 3d 663, 667-668.) The
comments are persuasive, albeit not conclusive, evidence of that intent. (Conservatorship
of Wendland (2001) 26 Cal. 4th 519, 542.) Branches, however, offers no contrary
evidence of legislative intent, and when taken together with the plain language of the
statute, we find the comment accurately expresses the intent of the statute.
6
An association’s “‘[g]overning documents’” include its CC&Rs. (§ 4150.)
11
the association is obligated to maintain or repair . . . .” The notice has several
requirements, but states nothing about a vote of the members.
Branches argues that CC&R section 12.4.2 “incorporates the requirements
of Civil Code section 6150. It is, consequently, a requirement of the
Act itself.” It argues the arbitrator misconstrued the trial court to limit the word
“election” to “a vote for the purpose of appointing someone to a position,” rather than
7
“anything requiring owner approval,” and therefore, a vote on whether to proceed with a
claim against the developer was within “a provision of” the Act. But the cases Branches
cites do not stand for this proposition. None of them address sections 4065, 4070, or
6150 at all, and certainly none of them state that an election required by the association’s
documents, but not by a statute, falls within those provisions.
Indeed, Branches next points out that some provisions of the Act do require
votes of the membership: “The Davis-Stirling Act, for example, explicitly requires
section 4065 elections to extend the term of the declaration (Civ. Code, § 4265, subd.
(a)), to amend the declaration (Civ. Code, § 4270, subd. (b)), and to make the association
responsible for repairing damage to units from wood-destroying pests or organisms (Civ.
Code, § 4780, subd. (b)).” The fact that certain provisions explicitly require such votes
does not help Branches; it only supports the contention that absent a specific requirement
in the Act to hold an election, the association’s governing documents control. (§§ 4065,
4070.) Branches points to no provision of the Act requiring a vote before filing a claim
against a developer; accordingly, neither sections 4065 or 4070 are an “unwaivable
statutory right” in this context.
Branches contends, for the first time on appeal, that section 6150, which
requires notice and a meeting before filing a claim against a developer, is “triply germane
here.” First, it asserts it is the “same requirement imposed by CC&R section 12.4.2.”
7
The arbitrator made no such finding.
12
This is incorrect on its face. Section 12.4.2 of the CC&R does not require a meeting, it
requires a vote. Branches next claims that section 6150’s “prior to” language mirrors the
CC&R language. While this is indisputably true, it is of little import here. The statute
and the CC&R section have different requirements.
Most importantly, Branches claims, section 6150 permits an association to
file its claim before giving notice of the required meeting if it “has reason to believe that
the applicable statute of limitations will expire before the association files the civil action,
the association may give the notice, as described above, within 30 days after the filing of
the action.” (§ 6150, subd. (b).) Branches claims this to be the situation here, because
Standard had previously filed and served a dispositive motion based on the statute of
limitations (which, in fact, the arbitrator denied).
This does not help Branches in any event. Section 6150, subdivision (b),
does not provide for “ratification,” as Branches claims. Section 6150 does not require
membership approval, merely notice and a meeting; there is nothing to “ratify.” After
complying with the section, the board can proceed to do anything it wishes with respect
to filing a claim. Allowing notice after filing the claim if the statute of limitations is a
concern merely creates a limited exception to the notice requirement. Section 6150
simply does not apply here.
Further, as Standard points out, even if the section did apply, Branches
failed to comply with it. It filed its arbitration claim in January 2016 and did not obtain a
vote of the membership until October 2016. It points to nothing in the statute that
permits “ratification” outside the 30-day notice period.
Branches also contends that Corporations Code section 5034 confers an
unwaivable right on an association’s members to ratify any action taken. Branches is
incorrect. That section states that the phrase “‘Approval by (or approval of) the
members’ means approved or ratified by the affirmative vote of a majority of the
votes . . . .” (Corp. Code, § 5034.) Branches argues, in effect, that the plain language of
13
the CC&Rs must be ignored. It cites cases that do not interpret this language in the
context of a homeowners association, and which do not stand for this proposition. It does
not cite any case (or statute) stating that CC&Rs requiring membership approval before
the board takes a certain action are unenforceable. Accordingly, we reject this
contention. “Prior to” means “prior to.” It does not mean “after,” unless there is specific
statutory authority permitting later ratification.
Branches next turns to section 5000, which states association meetings
“shall be conducted in accordance with a recognized system of parliamentary
procedure . . . .” Branches contends that because Robert’s New Rules of Order (4th ed.
2013) art. VI, section 39, states that approval of an action may occur by ratification,
ratification is required as a method of approval in all circumstances. No authority on
point supports this argument. Robert’s New Rules of Order, supra, art. VI, section 39,
itself states that ratification is only available when ratifying an action would not
“violate . . . [an organization’s] own constitution or by-laws.” Here, the association’s
“constitution” – its CC&Rs – state that prior assent is required.
Branches’ next argument (offered for the first time on appeal) is that “[a]s a
practical matter” the association “acts as the owner’s agent.” Branches cites no
California authority for this proposition, but asserts that because section 2307 provides
that an agent’s authority to act for its principal “may be” ratified after the fact, this
creates a legal requirement that ratification “be available” as an alternate method of
approval. We fundamentally disagree with Branches’ “agency” theory, given that the Act
sets forth extensive legal principles governing the management of associations. (§ 4000,
et seq.; see Villa De Las Palmas Homeowners Assn. v. Terifaj (2004) 33 Cal. 4th 73, 81.)
At no point in the Act is the association declared the “agent” of the owners; surely, had
the Legislature intended to create an agency relationship, it would have done so.
Moreover, even if we were to accept this theory, the fact that section 2307 states that
14
actions “may be” ratified after the fact does not create a statutory right requiring that
ratification be available in all circumstances.
Branches’ attempts to bring the relatively few cases that found an arbitrator
violated an unwaivable statutory right within the facts here are unavailing. Those cases
involve specific statutory directives or address the conduct of the arbitration itself, as
Branches admits. (See, e.g., Board of Education v. Round Valley Teachers Assn. (1996)
13 Cal. 4th 269; Ahdout v. Hekmatjah (2013) 213 Cal. App. 4th 21; Jordan v. Department
of Motor Vehicles (2002) 100 Cal. App. 4th 431; City of Palo Alto v. Service Employees
Internat. Union (1999) 77 Cal. App. 4th 327.) Branches insists “the Act mandates
ratification,” however, which, as discussed above, we find to be untrue. Therefore, these
cases are unhelpful. In sum, we conclude Branches has not identified an unwaivable
statutory right preventing an association’s CC&Rs from requiring approval prior to the
8
board instituting a legal claim against a developer.
Public Policy
Branches alludes to public policy at several points, claiming, for example,
that the Legislature has made a “clear pronouncement of public policy favoring
ratification.” We disagree that public policy works in its favor here.
The Act, as we have mentioned, provides a comprehensive framework for
the governance of homeowners associations. The Act provides for numerous limits on
the power of the board, and a system of checks on the board’s power. Associations are
required to publish certain information to the membership to keep them informed.
(§§ 5300, 5305, 5310.) Associations are required to act by a majority vote or a majority
8
Branches next looks to maxims of interpretation to support its argument that “prior”
does not really mean what it says it means. But because it does not identify a statute
including an “unwaivable statutory right,” we need not consider the arbitrator’s
interpretation of the contract.
15
of a quorum if a vote is required. (§§ 4065, 4070.) Even amendments to the governing
documents to delete construction or marketing provisions after an association is built
must be approved by the membership. (§ 4230.) Rules adopted by the board must be in
writing, within the authority of the board as conferred by the governing documents, and
reasonable. (§ 4350.) On certain subjects, the board cannot act by fiat and must provide
notice to members of potential changes in the association’s rules (§ 4360), and a
sufficient number of members can call a special meeting to attempt to reverse those
changes (§ 4365).
Section 6150 is a part of those checks. As we discussed above, it requires
notice to the membership and a meeting before legal action may be instituted against a
developer. The reason for this is sound: to ensure that a board, dealing with a difficult
issue like construction defects, has not lost the forest for the trees and decided to institute
legal action without notifying the members. This is completely consistent with the many
other homeowner rights that are set forth in the Act.
The CC&R provision here goes a step further, requiring affirmative consent
of a quorum of the members “prior to” instituting such action. This, too, is consistent
with the aims of the Act – to balance the association’s need to operate efficiently with the
rights of its members to be informed and participate in decisions that could impact the
association for years, if not decades, to come. Branches would have us believe that there
is a “right to ratify” after the fact, as if that confers some benefit on the owners. It does
not; it ignores their explicit right to consent beforehand, before a road has been taken that
will be difficult, expensive, and time consuming. We cannot ignore such a provision
because it is inconvenient for the association in this particular case; the association had
the CC&Rs and was on notice of their contents. Public policy requires us to follow their
plain language.
16
Accordingly, we find no violation of public policy in the arbitrator’s
decision, and conclude that judicial review of the arbitration award was not merited in
this instance.
III
DISPOSITION
The judgment is affirmed. Respondent is entitled to its costs on appeal.
MOORE, J.
WE CONCUR:
O’LEARY, P. J.
FYBEL, J.
17
Filed 8/24/18
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
BRANCHES NEIGHBORHOOD
CORPORATION,
G055201
Plaintiff and Appellant,
(Super. Ct. No. 30-2017-00913469)
v.
ORDER GRANTING REQUEST
CALATLANTIC GROUP, INC., FOR PUBLICATION
Defendant and Respondent.
Counsel for Respondent has requested that our opinion, filed on August 10,
2018, be certified for publication. It appears that our opinion meets the standards set
forth in California Rules of Court, rule 8.1105(c). The request is GRANTED.
The opinion is ordered published in the Official Reports.
MOORE, J.
WE CONCUR:
O’LEARY, P. J.
FYBEL, J.
18